Statement of Net Returns

Acronym Metric Definition Description
HWM High Water Mark A high water mark is the highest value that an investment fund or account has ever reached. A hurdle rate is the minimum amount of profit or returns an investment fund must earn before it can charge a Performance (Incentive) fee. This is a safety mechanism that incentivises the trader to grow the account Balance (and Equity) as they will only receive a Performance fee if they increase the watermark. This is independent to Management Fees.
ROR Rate of Return The formula for rate of return is based on Account Balance:

[(Current price - Original price) / Original price] x 100
A rate of return is the gain or loss on an investment over a specified time period, expressed as a percentage of the investment’s cost. Gains on investments are defined as income received plus any capital gains realized on the sale of the investment.
CAGR Compounded Annual Growth Rate The formula for CAGR based on account balance is:

CAGR = ( EV / BV)1 / n - 1

EV = Investment's ending value
BV = Investment's beginning value
n = Number of periods (months, years, etc.)
The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.

How fast does the investment grow on an annual basis whilst taking into comparison compounding of returns. Sometimes also known as the "Compounded Annualized Rate of Return" (CARR).
MaxDD Maximum Drawdown MDD = (TV– PV) ÷ PV

TV = Trough Value
PV = Peak Value
A maximum drawdown (MDD or MaxDD) is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown (MDD) is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as "Return over Maximum Drawdown" and the Calmar Ratio.
Balance Account Balance Account Balance is made up of closed trades and does not include unrealised profit or loss in active position. The balance of the investment account at the end of the trading interval and after compensation has been paid is 1,250 USD. The investor makes a request to withdraw 250 USD (20% of the balance)
Equity Account Equity Account Equity in trading refers to the true amount of money that one will be left with when all of the active positions are closed. The balance on an investment account is 1,000 USD at the beginning of the trading interval. However, by the end of the trading interval, the equity has fallen to 500 USD. When the account makes a loss, the investor pays no compensation to the manager. So, the equity plus the manager's compensation is 500 USD. The investor decides to withdraw 100 USD, or 20% of the equity on the investment account. After the withdrawal, the balance, equity and equity plus the manager's compensation are 20% lower and are equal to 800 USD, 400 USD and 400 USD accordingly.
Calmar (MAR) Ratio Calmar (MAR) Ratio Calmar Ratio = CAGR / MaxDD Developed by Terry W. Young in 1991, the Calmar ratio is short for California Managed Account Reports. The Calmar ratio is a comparison of the average annual compounded rate of return and the maximum drawdown risk of commodity trading advisors and hedge funds. The lower the Calmar ratio, the worse the investment performed on a risk-adjusted basis over the specified time period; the higher the Calmar ratio, the better it performed. Generally speaking, the time period used is three years, but this can be higher or lower based on the investment in question.
Sharpe Ratio Sharpe Ratio Sharpe Ratio = (Mean Portfolio Return − Risk-Free Rate)/Standard Deviation of Portfolio Return The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return, the performance associated with risk-taking activities can be isolated. One intuition of this calculation is that a portfolio engaging in “zero risk” investment, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.
Sortino Ratio Sortino Ratio The ratio S is calculated as;

S = (R-T)/DR,

R is the asset or portfolio average realized return,
T is the target or required rate of return for the investment strategy under consideration (originally called the minimum acceptable return MAR),
DR is the target semi-deviation (the square root of target semi-variance), termed downside deviation.
The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. S is expressed in percentages and therefore allows for rankings in the same way as standard deviation.
PF Profit Factor PF = GP / GL

GP = Gross Profits
GL = Gross Losses
This performance metric relates the amount of profit per unit of risk, with values greater than one indicating a profitable system.
Average Equity Average Equity Average of the starting and ending equity for the period. Equity Example: if the starting equity was 0 and the ending equity was $10,000 then the average equity would be $5,000.
MMFR Monthly Management Fee Rate Annual Rate / 12 Management Fee Rate Example: The user enters 2%, we would use the rate 2/12 = 0.16666....%
Management Fee Management Fee Average Equity * (Monthly Management Fee Rate / 100) Management Fee Example (using the above details): $5000 * 0.00166666 = $8.33
Adjusted Equity Adjusted Equity The actual equity in the account, adjusted for any net funding made by the client - as the MAM Master should not earn or lose fees based on the client's deposits and withdrawals, only trade PnL. Performance fee withdrawals are not taken in to account in this calculation, as the MAM Master's fees have reduced the equity for the client we don't add them back to the equity figure as the MAM Master needs to overcome the previous performance fees charged before charging new fees. Adjusted Equity Example: Client's starting adjusted equity is $10,000, actual ending equity is $20,000 and net deposits were $15,000 for the period. The adjusted equity at the end of the period would therefore be $20,000 - $10,000 - $15,000 = $5,000 which is the actual equity at the end, had the client not deposited more funds.
High Water Mark High Water Mark A historical record of the highest ending monthly equity, adjusted for client net funding. Performance fees can only be charged on any gain in Adjusted Equity over the High Water Mark. High Water Mark Example: If the Adjusted Equity 2 months ago is higher than the Adjusted Equity at any other time (including the current month), then that Adjusted Equity is the HWM.
Gain Over High Water Mark Gain Over High Water Mark The difference between the ending Adjusted Equity minus the High Water Mark. If the Adjusted Equity is higher than the existing High Water Mark, it will become the new High Water Mark and the MAM Master can charge any performance fees on the Gain Over High Water Mark. Gain Over High Water Mark Example: The existing HWM is $10,000, the ending adjusted equity for the period is $15,000. The new HWM becomes $15,000 and the performance fees can be charged on the difference ($15,000 - 10,000 = $5,000).
Net Return Net Return Net Return is the amount after all fees, charges and brokerage have been deducted  
Performance Fee Rate Performance Fee Rate The percentage of Gain Over High Water Mark that the MAM Master is entitled to claim as a performance fee. Performance Fee Rate Example: 20% of gain over high water mark.
Performance Fee Performance Fee Gain Over High Water Mark * (Performance Fee Rate / 100) Performance Fee Example (using the above details):
$5,000 * (20 / 100) = $1,000
Source Data The trades undertaken in the Multi Strategy Model Portfolio Traders Account for the period from 5 August 2015 until 30 June 2018 on which the Statement of Net Returns have been calculated. This Strategy commenced to be traded with Trend MDA in June 2018